A primary competitor ot any CBDC
One reason to pursue the development of a retail central bank digital currency in Australia may be because it offers the prospect of greater security and privacy than commercial bank deposits.
This idea is explored in a Reserve Bank research paper published yesterday, Valuing Safety and Privacy in Retail Central Bank Digital Currency. The paper details responses to questions about retail CBDC in the most recent Consumer Payments Survey.
The authors, from the RBA, University of New South Wales and Harvard University, said they found that the potential for different privacy settings, compared with what is currently offered by commercial banks, is a value-add of interest to consumers.
“The average consumer values transaction anonymity and, to the extent that transaction data do need to be shared with other entities, the average consumer cares about who those entities are,” the paper said.
The authors concluded that Australian consumers would be willing to pay a small fee for access to an account that makes transaction data available to the RBA instead of a commercial bank, assuming that AUSTRAC can access data in both cases.
Consumers reported being least comfortable with their transaction data being used as part of their digital profile or for targeted advertising. They said they were comfortable with their data being used to prevent fraud.
The paper did not spell out what retail CBDC privacy settings would look like in practice and it acknowledged that a CBDC that offered a high level of privacy or even anonymity might be counter to other CBDC priorities.
“The RBA has expressed a strong presumption that any issuance of CBDC in a market economy like Australia would be via a two-tier system, whereby private entities are involved in the distribution of CBDC
“CBDCs issued under such a two-tier model would either involve commercial entities having access to transaction data, or presumably at least the appearance of them doing so.”
While they would pay a premium for greater privacy, consumers said they were not willing to pay for the safety of central bank money.
“We find the result unsurprising, given the range of measures in Australia that make commercial bank deposits already safe,” the paper said.
The paper said a privacy-based value proposition on its own would not be enough to justify setting up a retail CBDC, given the costs involved.
The RBA conducted a CBDC pilot last year with the Digital Finance Cooperative Research Centre, concluding that “a CBDC has the potential to support increased efficiency and resilience in some areas of the payments system, though more research is required”.
Most of the use cases tested in the pilot involved commercial and cross-border payments. The RBA has said before that if it does develop a CBDC, those are the areas where it is likely to be used.
The latest research appears to do little to change that view.